Land Acquisition in Indonesia
Indonesian law recognizes two types of land acquisition by a foreign-owned company (PMA). One type is acquisition of unregistered and uncertified land; the other is acquisition of registered land. To acquire land, a PMA is required first to obtain a location permit except under certain circumstances in which the company is exempt from the requirement. A location permit allows a PMA or any other company to acquire land and obtain a land title. In Indonesia, land titles are usually completed within three years and also have the possibility of a one-year extension if at least 50% of the total land area has already been acquired. A location permit provides a right for the PMA to acquire land. However, it does not require the company to acquire all of the land stated in the location permit. It also does not force the landowner to sell all owned land to the company. The maximum area of land to be acquired by the PMA is, however, stated in the location permit.
Acquisition of unregistered land is more complex than acquisition of registered land because it can be difficult to run a complete and thorough background check of the history of the land in question. Such background checks will include the land’s history of legal ownership as well as any related environmental documents. Acquisition of unregistered land is usually done through a private sale between a landowner and a buyer. However, it should be noted that a deed of transfer signed in front of a certified land-deed official (PPAT) at the location of the land is required for registration with the relevant land office. On the other hand, acquisition of registered land is usually done through a deed of transfer in front a PPAT at the location of the land. This is to be followed by the registration and recording of the transfer with the relevant land office. Land checks for registered land are usually conducted at the district courts and the relevant National Land Agency (BPN) office before the transfer is completed. These checks enable prospective landowners to appropriately manage any existing disputes as well as assess the history of transfers of the land in question.
Basic Agrarian Law
Land and property in Indonesia are governed by the Basic Agrarian Law. This vital piece of legislation includes elements of both customary (adat) laws and laws introduced by Dutch colonial rulers. Before the Basic Agrarian Law was created, adat laws governed land registration for Indonesians; Dutch colonial laws did likewise for foreigners. The Basic Agrarian Law was therefore created to set up a single regime which would end the dual laws which governed land matters while at the same time maintaining some of the concepts applicable to land according to adat laws.
According to the Basic Agrarian Law, the government has the authority to determine the purposes for which land is to be used, the relationship between land and individuals or groups of individuals, and the consequences of legal actions involving land.
Certified and Uncertified Land
All land in Indonesia is classified as either state land and private land. With regard to private land, the Basic Agrarian Law introduced the classification of land rights and a registration system. This in turn led to the creation and issuance of land certificates by the BPN. Such certificates serve as evidence of legal rights to land. They include information on the land title rights, titleholder’s name, land area, title period, issuance date, and security matters related to the land the land. However, in spite of the existence of the land registration system, much private land in Indonesia remains uncertified. Many landowners in Indonesia attempt to use the girik right to support their claim. However, the girik right is not official evidence of rights to land. It is merely a land tax receipt detailing payment for taxes imposed over the land purchased. However, in cases in which there is no land right certificate present, a girik letter may be used as proof of ownership of uncertified land if it is supported by certain documents which provide sufficient evidence of ownership.